The financial systems of a country are crucial to its success as a whole, as well as the success of its citizens. A large part of the effective functioning of such economic systems is a public trust.
America’s banking system relies on people continuing to use their banks’ services and accounts, as this plays an important role in building a healthy economy.
This was the motivating factor for Congress to pass the Fair Credit Reporting Act (FCRA).
The Purpose of the FCRA
This Act was put in place to protect consumers and regulate what consumer reporting agencies can and cannot do with the information they collect. It also enacted regulations that dictate how companies that report to agencies like credit bureaus must handle certain interactions and obligations to customers.
Because of the vital role consumer reporting agencies play in collecting and assessing credit and other financial information, they have an obligation to act fairly and respectfully when dealing with consumer data. There must be a balance between gathering and using such data and also maintaining privacy, accuracy, and integrity.
The FCRA attempts to provide guidance to consumer reporting agencies on the best practices of their companies and also offers protection to consumers who have been wronged by negligent or careless reporting.
Acts Within the Fair Credit Reporting Act
Within the FCRA there are numerous other similar or related acts. The Dodd-Frank Act was included to prevent a major recession and as an added layer of protection in many ways. It created and implemented a system to monitor the relay of information to consumers. This Act also formed a warning system to notify the government of impending national economic issues.
The Dodd-Frank Act and other smaller acts within the FCRA are responsible for many of today’s standards and practices. It is these policies that allow consumers to have trust in the country’s financial systems or, at the very least, feel as though there are options for recourse when wrongdoing has occurred.
How the FCRA Protects Consumers
There are many opportunities for misreporting, and each of them can have long-term detrimental effects on an individual’s credit. As an example, if the credit reporting agencies have someone mistakenly reported dead, there will be little that person can do with their finances until the issue is resolved.
Credit card companies and banks cancel accounts, credit scores are reset to zero, no loan providers will approve applications, and insurance companies will refuse to insure someone who is reported dead. These issues can affect every area of someone’s life, making it impossible to get a job, have electricity or running water, legally drive a vehicle, or obtain a place to live.
A scenario like this may seem far-fetched but being mistakenly reported dead on a credit report is more common than many people realize. There are so many moving parts and different agencies providing information to entities like Experian and Equifax that a mistake like this can happen at any step of the process.
The companies that report to these agencies can mistakenly report a consumer as deceased. The Social Security Administration may also make the mistake of listing that someone has passed, which is then reported by agencies like TransUnion.
What the FCRA Requires of Reporting Agencies
The FCRA lays the groundwork for consumer reporting agencies by requiring them to implement necessary and reasonable procedures. These procedures should ensure that their information is as accurate as possible and that due diligence must be exercised.
Agencies are also required by law to investigate a customer’s dispute and make corrections as necessary in a timely manner. Sometimes this also includes suppressing any incorrect or misleading data that was wrongly included.
The Rights of Consumers Under the FCRA
The Fair Credit Reporting Act protects individuals’ right to obtain a full and complete copy of their credit report. In many instances, this copy must be provided free of charge to the consumer. It also stipulates that in order for someone to obtain the report of someone else, they must have a valid need. This can include situations where the consumer is seeking approval for a loan or bank account, or they have applied for a job.
It also lays out guidelines for how consumer reporting agencies must respond to the disputed information. If a consumer discovers inaccurate information in their report, the agency must investigate and respond in a timely manner.
The error must generally be corrected within 30-45 days. When no verification of the alleged inaccurate data can be found, it must be removed from the report. In addition, many types of derogatory marks on a credit report must be removed after seven years. There are exceptions, but this rule holds true in most cases.
Another right granted by the FCRA involves medical information and privacy. Creditors cannot use or even obtain medical information in an effort to approve or deny a credit application. Therefore, this type of data is prohibited from being included in consumer reports.
Privacy is a major concern and, as such, the FCRA provides protection in numerous ways. Names and addresses can be removed from prescreened offer lists and consumers no longer have to receive unwanted solicitation. In addition, businesses cannot include Social Security numbers or entire credit card or account numbers on paper documentation.
If a financial institution is or will be submitting derogatory information to a consumer reporting agency, they must notify the consumer. Individuals must also be notified as to the reason an application was denied if that reason involved information obtained from a credit report.
Seeking Damages Under the FCRA
Another important protection that is given to consumers by the Fair Credit Reporting Act is the right to seek damages from credit and consumer reporting agencies. In addition to the dispute process, people who are victims of FCRA violations have other avenues for resolution when the agencies fail to take reasonable or satisfactory action.
In these situations, consumers may file a lawsuit in state or federal court. Failing to comply with the Act can lead to the offending party being responsible for providing compensation. This can include money to cover the costs of any damages suffered as a result of the error and any expenses incurred in an effort to address the error. Attorney’s fees and court costs can also be included in the rewarded compensation.